It appears the holiday retail season was a complete bust(what a surprise). Some of the early numbers are starting to come out:
It appears that big ticket items were practically ignored this year as the consumer continued to pull back. This shouldn't be a surprise given the credit situation in this country.
Speaking of credit, I am starting to ask myself something: Is there such a thing as "credit" in this country right now? I am starting to wonder! Ask any automaker their thoughts on this and they will respond with a resounding NO!
It appears we have just ended our 25 year spending binge folks.
The numbers tell you that our country now finally realizes its time to pay the piper. Expect the consumer to concentrate on paying off debt and hoarding cash in 2009 versus spending it. This is a frightening scenario considering that 70% of our economy is consumer driven.
This will do nothing but accelerate the massive deflation that we are now witnessing.
Isn't it amazing how quickly things have changed in a span of less than a year?
Everyone feared inflation and another lost decade like the 70's when oil spiked up to $147 earlier this year.
Today, we sit here with oil under $40 a barrel as the Fed attempts to prevent a lost decade from a deflationary debt spiral similiar to Japan in the 1990's by flooding the system with credit.
Hello Washington! Its not going to work! The consumer can no longer afford to borrow anymore! We have enough debt for now! Thanks anyway!
The numbers say it all folks, and the early signs as seen above tell you that deflation is clearly defeating the Fed's attempt to re inflate.
The sad conclusion that I am slowly coming to is that either scenario(inflation/deflation) is going to result in a lost decade or more for our countries economy.
Deflation will rule in 2009 in my opinion. However, down the road, inflation will rear its ugly head which will then trigger another downturn in the economy.
More on that later.